On more than one occasion in recent years, there was a showdown between Democrats and Republicans over the debt limit of the USA. During one of these showdowns, Charlie Rose had Warren Buffett on his show and asked Buffett to give his opinion about the showdown. True to form, Buffett gave a simply analogy. He said that this was like a Game of Chicken where both sides raced against each other to see who would give in first. And then Buffett said: "Except that one of the two sides has just thrown the steering wheel out the window!"
My assessment of the Greece-EU showdown is that, at least todate, neither of the two sides has yet thrown the steering wheel out the window. I wonder, however, whether the above Game of Chicken is the adequate analogy.
Those who remember the movie "Rebel without a cause" will remember a different kind of a Game of Chicken, namely the one which catapulted James Dean into cult status. In that version of the Game of Chicken, it is not two cars which are racing against each other but, instead, it is two cars which are racing towards a cliff. The opponent is the cliff and not the other party. Winner is the one who jumps out of the car last. James Dean jumped out at the very last moment and could barely hold on to the cliff while his opponent went down the cliff in his car.
The point is: in the James-Dean-version of the Game of Chicken, neither party can influence the outcome by throwing the steering wheel out the window and each party can be reckless without destroying the other party in the process. Whoever is reckless will only destroy himself.
And, most importantly, both parties can be winners if they jump out of their cars at the same time! One could call that a prudent compromise. Perhaps the game theorists on both sides should figure out how they can change the Game of Chicken from Warren Buffett's to James Dean's version.
My assessment of the Greece-EU showdown is that, at least todate, neither of the two sides has yet thrown the steering wheel out the window. I wonder, however, whether the above Game of Chicken is the adequate analogy.
Those who remember the movie "Rebel without a cause" will remember a different kind of a Game of Chicken, namely the one which catapulted James Dean into cult status. In that version of the Game of Chicken, it is not two cars which are racing against each other but, instead, it is two cars which are racing towards a cliff. The opponent is the cliff and not the other party. Winner is the one who jumps out of the car last. James Dean jumped out at the very last moment and could barely hold on to the cliff while his opponent went down the cliff in his car.
The point is: in the James-Dean-version of the Game of Chicken, neither party can influence the outcome by throwing the steering wheel out the window and each party can be reckless without destroying the other party in the process. Whoever is reckless will only destroy himself.
And, most importantly, both parties can be winners if they jump out of their cars at the same time! One could call that a prudent compromise. Perhaps the game theorists on both sides should figure out how they can change the Game of Chicken from Warren Buffett's to James Dean's version.
"...One could call that a prudent compromise...".
ReplyDeleteI agree that it should be like this...
But it's about a centipede game (non a chicken game)!
"...A conflict between self-interest and mutual benefit. If it could be enforced, both players would prefer that they both cooperate throughout the entire game. However, a player's self-interest or players' distrust can interfere and create a situation where both do worse than if they had blindly cooperated. Although the Prisoner's Dilemma has received substantial attention for this fact, the Centipede Game has received relatively less...".
Realistic economic theories most often become much to complicated to be calculated respecting all relevant parameters. That is why economic professors delight in doing something easier called "game theory", where their imagination is allowed to freely select what parameters they do not consider, although they know that the model without it will no longer resemble reality.
ReplyDeleteThey are also free to select a name for that game, and I take the freedom to say that I can no longer bear hearing that name of "chicken game". Let us fry those chickens and have fun! ;)
H.Trickler
Yes, game theory is like theoretical physics -- abstractions that need to be tested against reality. I presume that you are equally dismissive of the last few decades of science, and the hypotheses that are neither proven nor disproven. Or the vague blunderings of geneticists, who happily intervene with the human genome to "improve" it, with unknown long-term consequences for humanity.
DeleteModern theoretical physics is no jota more convincing than politics, but they have the relief that latest theories are constructed in such a manner that it is provably IMpossible to test them with reality.
DeletePolitics always can pretend this and that ...
H.Trickler
Although politically INcorrect and factually wrong, this cartoon explaining why Greek ministers no longer wear a tie, made my day :O
ReplyDeletehttps://denkraum.files.wordpress.com/2015/02/griechen-keine-krawatten.gif
H.Trickler
Here is a very good article on the subject:
ReplyDeletehttp://www.socialeurope.eu/2015/02/consensus/